The music market

If you know your Fall from your Fauré and your Goldie from your Górecki then you just may have what it takes to be a record retailer. For many an entrepreneur raised on music, opening a record shop is the realisation of a dream; introducing young and old to a whole world of music, and distilling a lifetime’s passion into a burgeoning business.

But it’s a tough sector: the mass-market for vinyl has long since gone, despite a modest rise in sales recently, and the market for pre-recorded tapes – and practically every other recordable format we’ve bought or collected over the last 50 years – is rapidly shrinking in size. Even the once-ubiquitous music store CD is in its death throes, being rapidly eclipsed by net-based music retailers and mp3s.

However, although the format keeps changing, the one thing that remains the same is the UK’s insatiable appetite for music. Here are some things to consider before you decide to set up shop.

According to figures from the British Phonographic Industry (BPI), the average cost of a CD fell below £8 for the first time in 2009. 16 million albums were bought digitally in that same year, and digital album sales now make up over 12.5% of the market. The market for physical singles has completely disappeared, with downloads utterly dominating – now making up more than 99% of sales.

Year-on-year album sales were down overall in 2009, although the rate of decline has slowed and is far from the ‘death of music’ predicted by some of the more hysterical sections of the media. Sales fell 3.5% overall in that year – not as bad as some expected given the recession.

Recent years have proved difficult for music retail, with many companies going into administration, and supermarkets and web-retailers taking increasing shares of the market. The widespread availability of unauthorised free music online both hampers the development of legitimate digital music services and cuts into CD sales.

So although music in all its formats is still popular, record shops are not a dead cert by any means: the falling retail price of music continues to make life very difficult for retailers. However, the internet and mail order are viable alternatives to basing your business in a shop.

A different business tune

The age of the record store chain is coming to a swift end. Retailer Woolworth’s closed its doors for good in 2009, following the trend set by former mainstays such as Ourprice and Solo. The last bastion of mainstream CD sellers, HMV, closed another 60 branches in January 2011 as it too continues to struggle against the increasing dominance of digital.It seems clear, then, that the days of the large high street record store catering to a wide variety of tastes are numbered.

Today, if you want to be successful record retailer, whether in a shop or online, you need to target a niche sector, whether it be dance music, reggae, classical or indie. Vinyl records, surprisingly, have seen an increase in sales in recent years, reversing the seemingly unstoppable downward spiral seen since the 1990s. In 2010, 234,471 vinyl LPs were sold, the highest number since 2005 – but the format still only occupies a paltry 0.2% of the album market.

Classical records have also seen a real increase in sales, partly due to the popularity of pop-classic radio stations such as Classic FM. A smaller rise in jazz sales has also been noticed but only in the South East where radio station Jazz FM has also been successful in building a faithful – and well-heeled – audience. However, the move to digital radio via satellite TV may just see this trend spreading through the regions.

Music shop qualifications

Becoming a record retailer is a matter of dedication and knowing your subject rather than of having qualifications. The typical entry point for a retail owner is to have gained experience in record retailing, either as a worker in a record shop or more often as a buyer at a shop.

Mark Burgess, owner of independent London record store chain Flashback, agrees that knowledge of the industry is essential for starting out. “I would say don’t go straight into it – get some experience,” he says. “The records business is increasingly becoming an antiques business, and you wouldn’t open an antiques dealership without knowing about antiques. I had 15 years’ experience in the music business before I opened Flashback, and I got started by bringing a network of customers with me.”

Most begin small and build up – starting with just a box of rare or cheap records and a market stall is not uncommon. Phil Leigh, owner of Leeds mail-order outlet Norman Records, says, “I used to work in record shops years ago and eventually I was in charge of buying stock, which was great. I started up 15 years ago, with £50, a box of my own records and a typewriter, and began by taking ads out on Record Collector. A couple of years later I set up the website.

“I did it all from home but moved premises several years ago, and there are now eight of us working here. Starting small is good but the downside is you build up slowly. I suppose you have less to lose that way. I started doing this part time and one day quit my job and started doing this full time and finally it’s paid off.”

The qualities required are pretty much what you would expect for any other small business. “Aside from common sense, you need the patience of a saint, stamina and a very understanding partner,” says Leigh.

If you’re looking for advice on starting out there’s no substitute for talking to people already in the business. “I used to speak to other mail-order dealers on the phone and pop into second-hand record shops in Leeds to speak to them about stuff but largely I did it all single-handedly,” says Leigh.

The record store

So if you haven’t been put off by the decline in physical formats and the death of the high street record shop, and you feel like you have enough experience in the business to stay afloat, then it’s time to think about what kind of record store you want to open.

Many retailers are now choosing to go online. This means you don’t have to worry about rent or location, so your overheads are greatly reduced – although Phil Leigh makes it clear it’s far from free: “We still have the overheads of rent [for the warehouse], stock, postage, mailers, power, and of course the website needs to be maintained, which is quite expensive for us – even though we try to do it as cheaply as possible.”

Leigh believes that the design of your website is crucial to success. “I think people visit us because we try and be the closest thing to a physical record store we can be. They like our approach – we come across as humans and try and keep the tone friendly and personal. We’re not faceless and we hope that this personality shows through the website.”

Leigh says that he would love to open a shop one day, but the spiralling rent prices are a major obstacle. He adds: “There are only two really good independent record stores in Leeds, and they’re both struggling. If we opened a store in the city we’d be putting one of them out of business – it’s us or them. We don’t want to do that.”

If you still decide to go down the offline route, then choosing a retail location is important, as it is for any other business. Mark Burgess has the following advice: “You have to take various things into account and it’s a balance between affordability and visibility. Bear in mind that your records are going to take up a lot of floor space – you’re not opening a jewellery store”, he says. “Because of that, you’re not going to find premises in a bijou location, but do get on tourist traps if you can.”

And be sure that you enter an area which is not already served by a well-known record shop. “People come to us because we’re the only store in the whole of north London that sells new records,” Burgess says. “In that sense we’ve got a captive market and people are just relieved that they don’t have to travel miles to buy the record they want.”

You also need to think about whether you want to retail new stock direct from the labels’ distributors, or second hand records bought from private individuals. Most independent record stores specialise in second hand stock as less and less physical music is produced, although some indie labels are starting to press new releases on vinyl.

What kind you sell will affect your profit margins. “With second hand records, the ones you buy will be somewhere in the region of 50% of selling value,” says Burgess. “When buying new albums direct from distributors, you’re going to be looking at more like 60 to 70%.”

If you do decide to sell second hand, then it’s worth advertising locally to attract people to sell their stock to you, advises Burgess. “But slowly the printed media is becoming less and less attractive,” he warns. Also, ensure you don’t fall foul of the law when playing records in store. Burgess’ advice is to join the ERA Trade Association, which gives you a percentage off on both your PPL and PRS annual license fees (you need both to be allowed to play recorded music in a public place).

It’s also very important to provide a positive experience for your customers. Make sure you can offer expertise to customers looking for a particular genre or music similar to a given band, provide some kind of facility for listening to music, and make the environment welcoming for people – don’t let your store become a confusing maze of towers of dusty moth-eaten LPs.

Although Norman Records is expanding, and moving to bigger premises to handle larger amounts of stock, Leigh’s advice to potential entrepreneurs wishing to open a record store is to look elsewhere. “If someone asked me whether they should start a record shop, I would say no. It’s perpetually a struggle, especially with the economy as it is at the moment, and we’re constantly under threat from music piracy and digital downloads, with more and more people preferring to download music on their computer rather than buy an LP.”

So while the right type of offering can still succeed, it’s important to remain realistic about growth prospects in the industry. “HMV is about to go, and with it will go labels releasing music on CDs in this country.” says Mark Burgess. “Stores are closing all over the place and only the best are surviving. [Opening a record store is] certainly not an undertaking that you would take lightly.”